The Impact of Disaggregate Information under SFAS No. 131 on Earnings Response Coefficients

• Main Authors: Huichi Huang, 黃惠琦
• Other Authors: Taychang Wang
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/66540598013172833958

博士 === 臺灣大學 === 會計學研究所 === 98 === The purpose of this study is to examine investors’ perception of segment reporting disclosure, SFAS No. 131. SFAS No. 131 changes the way how firms were reported, from industry approach to management approach, which provides more disaggregate information to the market. Although SFAS No. 131 improves the relevance of segment reporting information, it may come at the cost of reducing comparability and reliability. This study examines how investors use and value disaggregated information provided under SFAS No. 131 requirement. This study addresses the question in two aspects. First, we anticipate that the price variability would increase along with the distribution of detail information under SFAS No. 131. We examine this question by introducing multilevel model to estimate the variation of earnings response coefficients (ERCs) across firms for three different groups of firms. The group of primary interests is firms that were reported as single-segment firms before SFAS No. 131 was effective but were reported as multi-segments firms after SFAS No. 131 was put into effect (SM group). We identify two other control groups to avoid the possibility that our results may be due to confounding effects in the sample period: firms that were reported as single-segment firms both before and after SFAS No. 131 came into effect (SS group) and firms that were reported as multi-segments firms in the pre-SFAS No. 131 period but were reported as single-segment firms in the post-SFAS No. 131 period (MS group). The evidence shows that the variation in ERCs increases for SM group, but not for SS group and MS group. Sensitivity tests show that the result remains the same while controlling for firm-specific factors. We do not find the same result under SFAS No. 14, which suggests that investors do utilize the disaggregate information provided under SFAS No. 131 regulation. Second, we estimate abnormal returns for the three groups around several event dates that are relevant to SFAS No. 131 news release or earnings announcement. We only find some evidence that the value of information for SM group is positive, compared with that for SS group. We find no evidence that abnormal returns are different between MS group and SS group. Put together, this result suggests that although the market utilizes the disaggregate information provided under SFAS No. 131 regulation, more information to the market may not necessarily offer positive value to the market.